Property values could decline by as much as 90% if owners continue to be held liable for dangerous cladding, according to a report by the Strata Community Association (SCA).
As it stands, owners are having to face levies of $30,000 – $60,000 to rectify these building deficits – and there are fears that aggressive investigation work to identify unsafe buildings will further increase awareness of this issue, significantly deterring future buyers.
The peak strata body also warn that holding owners accountable may soon lead to multi-billion-dollar class actions throughout Australia, and highlight a $4.2 billion cladding class action already being planned in Victoria.
SCA Chief Executive Erik Adriaanse is due to speak at the 2nd Annual Australian Cladding & Building Standards Summit – 25-26 June in Melbourne – and urges government to step in and provide better protection for owners, who are essentially the ‘innocent bystanders’ in this situation.
“This isn’t a joke”, he says. “There is no way buyers will be prepared to pay market value for a property which may be subjected to a cladding inspection further down the line and incur them a hefty five figure levy”.
“Yes, there are strata and other loans available to cover remedial work, but these are typically capped at $5million, which is often totally insufficient. Moreover, this will do very little to encourage future buyers and protect property values”.
Erik is also concerned that extending builders’ warranties from 2-6 years will only protect buyers in newer buildings and argues that another solution would need to be developed to see all owners financially supported on this issue.
In light of these concerns, the SCA report calls for state governments to start acknowledging there is a problem. “This is a political hot potato”, says Erik. “I predict that political parties who turn their back on this issue will become very unpopular and the opposition will no doubt cash in on it”.
Erik will discuss his key recommendations for government intervention at the 2nd Annual Australian Cladding & Building Standards Summit – to be held 25-26 June at the Rendezvous Melbourne.
The summit is the national event for government, industry and stakeholder perspectives on this issue and will examine how various solutions across the states and territories have played out, discussing possible improvements and considerations for further action.